Angolan state oil company Sonangol has adopted a set of austerity measures that include a review of all the company’s contracts, paying only half their nominal value, in a document published in Luanda.
The “Guidelines for Reduction and Cost Containment in the 2015-2017 triennium” says at one point that “the sharp reduction in oil prices undermines all revenue collection forecasts and consequently the costs and expenses projected based on the initial estimated level of revenue collection.”
The guide is nine pages long and includes measures for reducing expenditure and requires Sonangol and its subsidiaries to “undertake substantial reductions in their structural costs, operating costs and capital expenditure,” in addition to an employee wage freeze and a review of the relevance of all labour contracts, and the “cancellation of all short training, seminars and other meetings outside the country.”
With respect to third party agreements in areas such as economic and financial consulting, legal and information technology systems, the Sonangol board of directors has forced a review of all contracts and states that “for contracts to be continued discounts in the range of 45 to 50 percent must be negotiated,” which means that may be terminated if their current cost is not halved.
In addition to these measures, the guide also presents a number of decisions concerning the operation, including the obligation to “postpone investment projects from subsidiaries presenting negative cash flow” and the “reduction of production costs per barrel in operated blocks (Block 3/05 and 4) to US$20. ”